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Trading stocks based on breakouts of chart patterns
CAT - Identified rectangle on daily chart, pattern length is about 1 month. See attached file. This is the same rectangle from a few days ago. Sell order was executed at price of $88.92 for 48 units. Stoploss at $91.23, target at $79.92.
Positions closed
AMZN - My stoploss was hit at $193.45 for a net loss of $208.92. See attached file
That's it for 22-Nov-2011.
Can you help answer these questions from other members on NexusFi?
JNJ - Identified symmetrical triangle on daily chart, pattern length is about 4 months. See attached file. Sell order was executed at price of $62.3 for 117 units. Stoploss at $63.21, target at $54. The stoploss here is above the high of the day before the day of breakout. This is because the breakout day range was almost entirely outside of the pattern.
LOGI - Identified rounding top on yearly chart, pattern length is about 2.5 years. See attached file. Sell order was executed at price of $7.4 for 430 units. Stoploss at $7.69, target at $4.4. The pattern here is far from being a perfect example for a rounding top, but I thought it was worth the risk.
AMZN - Identified broadening ascending wedge on weekly chart, pattern length is about 1 year. Attached file shows this pattern on the daily chart. Sell order was executed at price of $187 for 25 units. Stoploss at $194.61, target at $125.
Positions closed
SPY - My take profit order was executed at $115.49 for a net profit of $958. The order was executed outside of RTH (regular trading hours) on 11:09 my time, which is 4:09am ET. This was very fortunate, as the day's low was above this price. (the skepticals can look at IB.jpg)
LOGI - My stoploss was hit at $8.05 for a net loss of $283.8. See attached file. The original stoploss was $7.69 but because the stock opened much higher than that, it was triggered and executed at $8.05. That's the problem with stocks as opposed to futures, which trade all the time. I think I will not try to enter LOGI again based on this pattern, because it was not an accurate pattern to begin with.
CAT - My stoploss was hit at $91.23 for a net loss of $112.88. See attached file.
I finished describing all of my trades and positions, so I would like to write a short summary of my status and open positions at this point:
I have made 17 trades so far, 9 of them are already closed, for a total net profit of $418.19. I don't have any new orders in the system as of this moment, but if I will insert orders today, I will of course update the journal.
My open positions are:
MU - Short at price of $6.37 for 105 units. Stoploss was moved to $7.01 (because of "ice line" breach), target at $3.
USO - Short at price of $37.8 for 173 units. Stoploss at $38.44, target at $34.2.
AA - Short at price of $9.47 for 300 units. Stoploss at $9.87, target at $7.5.
AIXG - Short at price of $12.25 for 170 units. Stoploss at $12.9, target at $7.3.
BP - Short at price of $41.75 for 89 units. Stoploss was moved to $41.14, target at $38.3. I moved the stoploss because of risk management. With BP, I reached to price $39.41, which is 111 ticks from my target and 353 ticks from my original stoploss which was at $42.94. It is poor risk management to risk 353 ticks for a possible gain of 111 ticks. Therefore, I moved the stoploss to 1 tick higher than the close of the 22nd, because on the 23rd, the stock gaped down. In retrospect, maybe I should have moved the stoploss to $40.52, which was 111 ticks from $39.41, making it a better risk/reward ratio. attached file
YHOO - Short at price of $15.1 for 220 units. Stoploss at $15.7, target at $12.2.
JNJ - Short at price of $62.3 for 117 units. Stoploss at $63.21, target at $54.
AMZN - Short at price of $187 for 25 units. Stoploss at $194.61, target at $125.
The system I made was originally for futures, where calculation was done in ticks. For stocks, however, the number of ticks has different meaning depending on the price of the stock, e.g. for a stock priced at $400, 200 ticks ($2) are about %0.5 movement, while for a stock priced $4, 200 ticks are %50 movement.
Therefore, I changed my risk management to be based on percentage instead of dollar value. From now on, I will check the projected move in percentage terms:
1. If the move is bigger than %18, I will set the maximum stoploss at a third (1/3) of the size of the move.
2. If the move is bigger than %6, I will set the maximum stoploss at a fifth (1/5) of the size of the move.
3. If the move is less than %6, I will not enter the deal.
4. If the stoploss according to the LDR (last day rule) is bigger than the maximum stoploss (as determined by rules 1&2), I will not enter the deal.
I'm writing this post 2.5 hours before the trading day ends and it was not a good day so far.
New Orders
BAC - Identified descending triangle on the daily chart, pattern length is about 3 months. see attached file.
Breakout to the downside was set to 5.08, stoploss at 5.29, target at 3.3. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 834 units.
DISH - Identified symmetrical triangle on the daily chart, pattern length is about 2 months. see attached file. I traded this pattern to the upside 2 weeks ago (and lost). I'm now trying to go for the downside.
Breakout to the downside was set to 23.09, stoploss at 24.19, target at 17.09. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 165 units.
GE - Identified broadening ascending triangle on the daily chart, pattern length is about 4 months. see attached file.
Breakout to the downside was set to 14.65, stoploss at 15.16, target at 11.65. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 353 units.
New Positions
BAC - Sell order was executed at price of $5.08 for 834 units. Stoploss at $5.29, target at $3.3.
Positions closed
AMZN - My stoploss was hit at $194.985 for a net loss of $201.63. This is the second time I lose on this pattern with this stock, so I will stop for now and try to analyze the chart again.
USO - My stoploss was hit at $38.464 for a net loss of $116.91.
YHOO - My stoploss was hit at $15.71 for a net loss of $136.4.
BP - My stoploss was hit at $41.14 for a net profit of $52.29. This was the trailing stoploss I wrote about 2 posts ago, and I should have moved it more forward.
DIS - Identified down channel on the weekly chart, pattern length is about 3 months. see attached file.
Breakout to the upside is set to 37.01, stoploss at 33.75, target at 48.5. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 55 units.
GLD - Identified symmetrical triangle on the daily chart, pattern length is about 3 months. see attached file.
Breakout to the upside is set to 172, stoploss at 169.05, target at 205. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 61 units.
JNJ - Identified symmetrical triangle on the daily chart, pattern length is about 4 months. see attached file.
Breakout to the upside is set to 65.39, stoploss at 63.79, target at 73.9. Because the project move is less than %18, the risk was 0.5% of $23K, which is $115. Therefore, I set the order for 70 units.
This is a reverse of the trade I had last week of shorting JNJ.
NVDA - Identified rectangle on the daily chart, pattern length is about 4 months. see attached file.
Breakout to the upside is set to 16.14, stoploss at 15.19, target at 21.8. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 185 units.
VIP - Identified H&S bottom on the daily chart, pattern length is about 4 months. see attached file.
Breakout to the upside is set to 12, stoploss at 11.6, target at 15. Because the project move is more than %18, the risk was 0.8% of $23K, which is $184. Therefore, I set the order for 427 units.
Changes in existing orders
I canceled the orders for DISH and GE because they are not close anymore to the pattern boundaries.
Positions closed
AIXG - My stoploss was hit at $13.16 for a net loss of $156.7.
JNJ - My stoploss was hit at $64 for a net loss of $267.56. The loss was greater than anticipated because of 2 things. First, the gap today at the opening. Second, the dividend they gave.
Changes in open positions
BAC - I moved the stoploss higher to 5.44 (away from the price) before the opening because I didn't want it to be caught on the hugh opening. So far, I have been right about it, as BAC only went lower. I have moved it now to 5.38 and I will try to move the stoploss back to the original position at 5.29 tomorrow.
Second, I wanted to update about changes made in my positions after I made the last post, which was 2-3 hours before the close.
Positions closed
AA - My stoploss was hit at 9.88 for a net loss of $126.
BAC - My stoploss was hit at 5.38 for a net loss of $258.54. It seems, after all, that by moving the stoploss backward may have saved me some $$ (opening price of BAC in the session was ~5.44), but I should have closed the position once the price was below 5.29 (it was 5.20 I think at the low). This is another lesson.
Third, I would like to post a summary for my November trades.
Summary for November 2011
I made 18 trades, 17 of them are already closed.
3 of the trades were profitable.
I lost $793.26, which is %3.45 of my total equity.
Total Summary
My average risk per trade is $132.13.
My winning percentage is %16.67
My expectancy, in R terms, is -0.33. This is calculated in the following way (according to the book of Van Tharp):
1. For each trade, I write how much I risked and the result of the trade in $$ terms.
2. Then, I calculate the R-multiple of the trade: R == (Net P/L) / (Risk). R-Multiple is negative if the trade was a loser. The idea is that each R-multiple should not be less than -1. If it is, it means you lost more than you planned to risk on the trade and that is not good.
3. I sum all the R-multiples of all the trades and divide the number by the number of trades. This is the total expectancy. The higher the better. Negative expectancy means your system is losing money. Of course, you need to do at least 100-200 trades before you can jump to conclusions.
My maximum draw-down, in R-multiple terms, is 12.11. In $$ terms it is $1608.13. In % terms it is %6.99 and in length terms, it is 5 consecutive losing trades.
My average profit is $79.89
My average loss is $123.96 Win/Loss ratio is 0.64 (less than 1 means losing)
My Calmar ratio is -0.49
That's it for now. I hope December will be a better month.
